“Bubble Watch” digs into trends that may indicate economic and/or housing market troubles ahead.

Buzz: California cities are leading a brewing cooldown in home prices nationwide.

Source: My trusty spreadsheet analyzed two recent home price reports: Black Knight’s report on median sales prices for July in 50 big U.S. markets, and Case-Shiller’s price indexes for 20 metro areas for the three months ended in June, which tracks price changes of individual homes sold.

The trend

Neither of the valuation math was kind to California.

Six California markets ranked among the worst performers in Black Knight’s tracking of price falls from springtime peaks. Case-Shiller found six down markets nationally for June — three in California.

Real estate insiders suggest these may be seasonal dips. But why are the 10 markets with the biggest slips tracked by Black Knight and all six decliners from Case-Shiller located between the Pacific coast and Denver?

The details

Simply put, this year’s soaring mortgage rates and rising consumer anxieties have shaken the foundation for the sky-high home prices of the pandemic era — especially in California.

Consider Black Knight’s math …

San Jose: July prices were 10% off their peak (the largest dip of the 50 metros).

San Francisco: 7% off the peak (No. 3 dip).

San Diego: 6% off the peak (No. 4 dip).

Los Angeles-Orange County: 4% off the peak (No. 5 dip).

Sacramento: 3% off the peak (No. 7 dip).

Riverside-San Bernardino counties: 3% off the peak (No. 8 dip).

The other top drops were Seattle (8%), Denver (4%), and Portland and Phoenix (3%).

And what Case-Shiller shows …

San Francisco: Off 1.3% June vs. May (the second-largest drop of the 20) — first dip in 24 months.

San Diego: Off 0.7% in a month (No. 3 dip) — first dip in 32 months.

Los Angeles-Orange County: Off 0.4% in a month (No. 4) — first dip in 30 months.

The other drops: Seattle (1.9%), and Portland and Phoenix (0.1%).

Another view

Remember what matters most to house hunters — the monthly payment required to finance a purchase.

The typical U.S. house hunter must now put 36% of their income toward house payments, according to Black Knight’s “affordability” index vs. the 25-year average of 24%. So today’s house hunter has one-third less buying power than the norm.

“Given the large role affordability challenges appear to be playing in shifting housing market dynamics, the recent pullback in home prices is likely to continue,” says Andy Walden, Black Knight’s vice president for enterprise research.

How bubbly?

On a scale of zero bubbles (no bubble …read more

Source:: The Mercury News


Bubble watch: California home prices lead US declines off record highs

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